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Banks of Switzerland – Part III (SBC and UBS)

29 May, 2009

In order to understand what has been happening to the economy of the U.S. in the last decade, we must look to the banks, to their history, and to the cross-ties they’ve created between themselves.  I am nearing the end of this long series on two major players in the “money games” of the rich and famous, but there is still more I must say about UBS.

1995 was another busy year for SBC which fully integrated O’Connor and Associates (a bit of information about O’Connor can be found (here), established SBC Capital Markets in New York, acquired S.G. Warburg Plc London (a European Investment Bank) which was renamed SBC Warburg, acquired Brinson Partners Chicago (an institutional asset management firm).  In the same year, UBS opened branches in Madrid, Malaysia, and representative offices in Prague and Santiago de Chile.
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S.G.Warburg

S.G. Warburg was established as a mutual aid society for Jewish refugees from Nazi Germany. After World War II it became known as a daring merchant bank whose bold initiatives frequently startled London’s financial establishment. The company grew to be the United Kingdom’s premier investment house and darling of the financial world; however, in the mid-1990s the bank encountered an exceptional string of setbacks that left it vulnerable to a takeover from a stronger bank, and in May 1995 Warburg formed an alliance with the Swiss Bank Corporation (SBC), Switzerland’s third-largest bank.  (bold emphasis mine)

The name Warburg should sound familiar to you (orphan Annie and Daddy Warbucks).  The family descends from a money lending business started in 1559.    Family history from Wikipedia (here)

Their first known ancestor was Simon von Cassel, who died in 1566. They took their surname from the city of Warburg. The brothers Moses Marcus Warburg (17631830) and Gerson Warburg (17651826) founded the M.M.Warburg & CO banking company in 1798 that is still in existence. Moses Warburg’s great-great grandson, Siegmund George Warburg, founded investment bank S. G. Warburg & Co in London in 1946. Siegmund’s second cousin, Eric Warburg, founded Warburg Pincus in New York in 1938. Eric Warburg’s son Max Warburg (not to be confused with Eric’s father Max Warburg) is currently one of the three partners of M.M.Warburg & CO.

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One of the members of the family in the United States was Felix Warburg. He was a banker and philanthropist, and his house in New York City became the Jewish Museum.   Another American Warburg was Paul Warburg, the father of the U.S. Federal Reserve System.  (bold emphasis mine)

Here are three of the Warburgs who affected American financial history.  Also from the Wikipedia link above.

  • Felix M. Warburg (1871–1937), New York banker, philanthropist, brother of Max, Aby and Paul Warburg
  • James Paul Warburg (1897–1969), son of Paul Moritz Warburg, advisor to Franklin Delano Roosevelt in the early days of the Brain Trust, American delegate to the London Economic Conference, economist, banker…  (bold emphasis mine)

And here are a couple of more things to keep in mind about Paul Warburg.  (here)

On October 1, 1895, Warburg was married in New York City to Nina J. Loeb, daughter of Solomon Loeb, founder of the New York investment firm of Kuhn, Loeb & Company. The Warburgs were the parents of a son, James Paul Warburg, and a daughter, Dr. Bettina Warburg.   (bold emphasis mine)

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He became a director of the Council on Foreign Relations at its founding in 1921, remaining on the board until his death. From 1921 to 1926 Warburg was a member of the advisory council of Federal Reserve Board, serving as president of the advisory council in 1924-26. He was also a trustee of the Institute of Economics, founded in 1922; when it was merged into the Brookings Institution in 1927, he became a trustee of the latter, serving until his death.   (bold emphasis mine)


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Brinson Partners, Chicago:

Gary P. Brinson

Gary Brinson (Bio) along with George F. Russell, Jr., Warren Buffett, and William Gross, was named in 1993 as one of the four most influential people in the institutional investing world. In 1974, the firm known as Brinson Partners (then a unit of First Chicago) was one of the first to invest overseas. Gary Brinson led a management buyout of the unit in 1989 and the firm was later acquired by Swiss Bank Corp.   (here)   [bold emphasis mine]


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In 1996, SBC reorganized, creating a SBC  Switzerland, SBC Private BankingSBC Warburg (Investment Banking) and SBC Brinson (Asset Management).

And then, in 1997, SBC acquired Dillon Reed & Co.

Dillon Read originated in 1832 as the Wall Street brokerage firm Carpenter & Vermilye. However, it is best known for its actions during the 1920s. During that time Clarence Dillon managed the rescue of faltering Goodyear Tire & Rubber Company, engineered the buyout (in 1925) and subsequent sale of Dodge Motors (in 1928) to Chrysler, launched the first post-war closed-end investment trust (in 1924), and led the largest-ever stock offering (in 1926). By the end of the decade, Dillon Read was considered to be an investment-banking powerhouse, alongside J.P. Morgan & Co. and Kuhn, Loeb & Co..

Dillon Read was purchased by Swiss Bank Corporation (SBC) in 1997 and merged with London-based investment bank S. G. Warburg & Co. (purchased by SBC in 1995) to become SBC Warburg Dillon Read. (here) [bold emphasis mine]


The big news comes in 1997 when a merger is announced between SBC and UBS.

The merger created one of the largest banks in Europe and THE largest Private Banking and Assessment Management Institutions.

By late 1997 it was readily apparent that Swiss Bank Corporation and Union Bank of Switzerland were two banks moving in opposite directions. Swiss Bank had well positioned itself to compete in the globalized financial services world through its 1990s acquisition spree that garnered it O’Connor & Associates, Brinson Partners, S.G. Warburg, and Dillon Read. By contrast, UBS was clearly reeling and had failed, unlike its two Swiss rivals, to complete any significant acquisitions in recent years (the newly named Credit Suisse Group had acquired Winterthur Insurance in a $9.51 billion deal in mid-1997). Thus, despite the combination of Swiss Bank and UBS announced in December 1997 being touted as a “merger of equals,” it quickly became clear that Swiss Bank was taking over UBS, even though the former (with assets of SFr 439 billion) was smaller than the latter (with assets of SFr 578 billion). (here[bold emphasis mine]

Okay only one more part needed to discuss post-merger UBS.

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